Which type of expenses can typically reduce taxable profits?

Ordinary business expenses are recognized as costs that a business incurs in the course of its day-to-day operations to generate revenue. These expenses can include items such as rent, utilities, salaries, and office supplies. Such costs are considered necessary and directly associated with the business's primary activities, making them deductible from taxable profits.

By deducting these ordinary and necessary expenses from total income, a business can effectively lower its taxable profit, which subsequently reduces the amount of tax owed. This concept is fundamental to tax accounting, as it aligns with the principle that taxes should be paid only on net profit after essential business expenses have been accounted for.

The other options do not qualify for reducing taxable profits. Personal expenses of the business owner are not deductible as they do not pertain to the business's operations. Capital expenditures, such as investments in long-term assets, usually affect taxable income differently, often being depreciated over time rather than deducted in full when incurred. Lastly, subjective costs that do not directly contribute to revenue generation cannot be classified as deductible business expenses, as they do not meet the criteria of ordinary and necessary expenses that can be deducted for tax purposes.